Tax News

CCH (cch.taxgroup.com) reports:

  The California Legislature passed two budget trailer bills as part of the budget deal negotiated between Gov. Arnold Schwarzenegger and legislative leaders that, if enacted, would increase personal income tax withholding, accelerate the installment payments for personal income and corporation franchise and income taxes, retroactively revise the estimated tax underpayment penalty to conform the application of withholding credits to the revised estimated tax installment percentages, generally conform to federal backup withholding provisions, and require qualified purchasers to register with the California State Board of Equalization (BOE) for purposes of reporting and paying use taxes.

  Notably absent from the California budget agreement is the so-called Amazon proposal to create a presumption of nexus for online sellers for sales tax purposes under certain circumstances. The governor previously vetoed such a proposal (S.B. 17, Third Extraordinary Session, was vetoed by the governor on June 30, 2009).

CCH (cch.taxgroup.com) reports:

  The Senate is expected to wait until September to take up health care reform legislation. President Obama, who had called for its passage before the August recess, said that he had no problem with this delay as long as work continued during the recess. PAYGO legislation passed the House, but the Senate may not take up the measure. The IRS reminded taxpayers of the temporary tax incentives in the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act) (P.L. 111-5) and finalized filing rules for small exempt organizations. On the international front, the IRS announced that it intends to issue guidance for individuals receiving gifts and bequests from expatriates and a Treasury Department official said that negotiating tax treaties is a priority.

Legislation

  Senate Majority Leader Harry Reid, D-Nev., said on July 23 that the Senate will wait until September to take up health care reform legislation, but he expects that the Senate Finance Committee will mark up its bill before August 7 (TAXDAY, 2009/07/24, C.2). Reid said the delay was in response to numerous complaints from Republican lawmakers that leadership is moving too quickly to pass complex legislation that would have far-reaching impact. Baucus hopes to mark up his health care overhaul during the week beginning August 3, just day days before the Senate leaves for a month-long recess. Baucus continues to hold meetings with a group of six bipartisan members of the Committee who are negotiating the bill. House lawmakers on July 22 voted 265-to-166 to approve the Statutory Pay-As-You-Go Bill of 2009 (2920) (TAXDAY, 2009/07/23, C.1). Under PAYGO, lawmakers would be required to fully offset any new mandatory spending or tax cuts so that the budget deficit will not increase. The Senate may not take up the measure as Senate Budget Committee Chairman Kent Conrad, D-N.D., has said he opposes the bill over concerns about exemptions and the possibility of relinquishing control of budget baselines to the White House.

  President Obama dropped his call for both House and Senate passage of health care reform legislation by the August recess after Senate Majority Leader Harry Reid, D-Nev., announced that the Senate would not be able to meet the president's deadline. Obama said he had no problem with the delay as long as work continued diligently during the month-long recess (TAXDAY, 2009/07/24, C.2). The president said his target date for a final package to reach his desk is the fall.

  Obama began to weigh in on some of the financing options passed by the House Ways and Means Committee and under consideration by the Senate Finance Committee, suggesting that a House proposal to impose a surtax on wealthy households meets his general principle to not raise taxes on the middle class. He also expressed interest in proposals under consideration by the Senate tax-writing panel to cap the tax exclusion for high-end health insurance plans and penalize insurance companies that provide the so-called Cadillac, gold-plated coverage. He stressed he does not support eliminating the tax break altogether and opposes taxing health care benefits on anyone already receiving them (TAXDAY, 2009/07/24, W.1).

IRS/Treasury

  Exempt Organizations. Final regulations detail which small exempt organizations must file Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required To File Form 990 or 990-EZ (T.D. 9454,
TAXDAY, 2009/07/23, I.1). The IRS declined to exclude small exempt organizations that have little or no income.

  Recovery Act. Many of the tax incentives in the 2009 Recovery Act (P.L. 111-5) are temporary; therefore, the IRS encouraged taxpayers to take advantage of them before they sunset (IR-2009-67; TAXDAY, 2009/07/21, I.1). The IRS highlighted the deduction for state and local sales taxes of qualified new vehicle purchases, energy tax incentives, the American Opportunity Tax Credit, the first-time homebuyer credit, and the Making Work Pay Credit.

  Gifts and Bequests. The Heroes Earnings Assistance and Relief Tax Act of 2008 (P.L. 110-245) added new filing and reporting requirements on individuals who received gifts and bequests from expatriates. The IRS announced that it intends to issue guidance in this area (Announcement 2009-57, TAXDAY, 2009/07/20, I.1).

  Tax Treaties. A Treasury Department official said on July 23 that the U.S. is anticipating updating some existing tax treaties and negotiating more tax information exchange agreements (TAXDAY, 2009/07/24, T.1). Treasury International Tax Counsel John Harrington relayed that recent agreements with Luxemburg and Switzerland have focused on information exchanges, rather than resolving all issues.

  Return Preparers. The IRS invited tax professionals and consumers to comment on its review of return preparers (IR-2009-68, Notice 2009-60; TAXDAY, 2009/07/27, I.7). The IRS is holding the first in a series of nationwide public meetings in Washington, D.C. on July 30 (IR-2009-66; TAXDAY, 2009/07/15, I.1).

  Tax Tips. The IRS launched its "Summertime Tax Tips" with tips for job seekers, new business owners, recently married couples, students with summer jobs, and members of the U.S. Armed Forces (TAXDAY, 2009/07/22, I.2.; TAXDAY, 2009/07/23, I.4). The IRS also reminded taxpayers that its website offers many explanations and materials in Spanish.

  By Jeff Carlson, Paula Cruickshank and George L. Yaksick, Jr., CCH News Staff

CCH (cch.taxgroup.com) reports:

  The IRS has released proposed regulations on the issuance of Taxpayer Assistance Orders (TAOs) by the National Taxpayer Advocate (NTA) to reflect legislative changes and to provide updated guidance on the administration of TAOs. The regulations are generally effective for TAOs issued on or after the date the final regulations are published. Code Sec. 7811 authorizes the NTA to issue a TAO when a taxpayer is suffering or about to suffer a significant hardship as a result of the manner in which the internal revenue laws are being administered by the IRS. A TAO may be issued by the NTA regardless of whether a taxpayer has submitted an application with the NTA on Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order).

  The proposed regulations provide guidance on what constitutes significant hardship, including specific guidance with regard to the 30-day delay standard. However, a finding by the NTA that a taxpayer is suffering or about to suffer a significant hardship will not automatically result in the issuance of a TAO. The NTA must make a separate determination that the facts and law support relief. If and when a TAO is issued, it acts as an order directing the IRS to either cease any action or take any action under any provision of the internal revenue laws within a specified time. The IRS must comply with the TAO unless it is appealed and then modified or rescinded by the IRS Commissioner, IRS Deputy Commissioner, or the NTA. The TAO may be issued to an office, operating division or function of the IRS, as well as any private collection agency working under contract with the IRS. However, a TAO cannot be issued to the IRS Criminal Investigation (CI) division if the CI division reasonably determines that the TAO would impede its investigation of the taxpayer.

Proposed Regulations, NPRM REG-152166-05, 2009FED ¶49,424

Other References:

 
Code Sec. 7811

  CCH Reference - 2009FED ¶43,308A

  Tax Research Consultant

  CCH Reference - TRC IRS: 3,058.05
CCH Reference -
TRC IRS: 30,220
CCH Reference - TRC IRS: 45,112.20
CCH Reference - TRC IRS: 45,204.50

CCH (cch.taxgroup.com) reports:

  The IRS has released materials used during a series of two-hour training sessions on governance and tax-exempt organizations. The sessions were part of a continuing professional education program for Exempt Organizations examination agents, determinations specialists, tax law specialists and managers (TAXDAY, 2009/06/09. I.1). The materials, which are available on the IRS website at http://www.irs.gov/charities/article/0,,id=208454,00.html, include course outlines, presentation materials, excerpts from the Internal Revenue Manual, policies and practices related to governance of 501(c)(3) organizations and selected portions of Form 990 and its instructions.

CCH (cch.taxgroup.com) reports:

  House Democratic leaders huddled on July 24 to discuss the possibility of bypassing the House Energy and Commerce Committee and taking its massive health reform bill directly to the floor for a vote. The Committee has delayed a markup of its portion of the bill as conservative Democrats known as Blue Dogs have threatened to withhold approval of the measure until they are satisfied that the costs are realistic and manageable. House Energy and Commerce Committee Chairman Henry Waxman, D-Calif., showing frustration with the inability to move the bill, made the threat after a contentious meeting with members of his panel.

  House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., told CCH that he was meeting with House Speaker Nancy Pelosi, D-Calif., to discuss holding the direct floor vote. Rangel also affirmed that the bill would be changed before the vote, but declined to give any details. There had been earlier discussions of raising the threshold for applying a surtax on wealthier Americans as a means to pay for health reform changes, but at the time Rangel dismissed the idea.

  The pressure for the House to act before leaving for its summer recess on July 31 is growing, and the impasse in the House Energy and Commerce Committee may be providing the incentive to move forward. Pelosi on July 23 played down the possibility of bypassing the Committee. "I don't want to do that, "she told reporters following a meeting with House Democratic leaders, but by the next day she was holding meetings to discuss the option.

White House

  President Obama met with Senate Majority Leader Harry Reid, D-Nev., and Senate Finance Committee Chairman Max Baucus, D-Mont., at the White House on July 24. Both Reid and Baucus have said they believe the Finance Committee will be able to complete its mark up of a health care bill before the August recess. White House Press Secretary Robert Gibbs said the White House meeting addressed process and substantive issues but he did not know if they included proposals to tax health care benefits.

  The president at a health care town hall meeting in Shaker Heights, Ohio, on July 23 (TAXDAY, 2009/07/24, W.1) expressed interest in a few of the health care financing options under consideration by the tax-writing panel. Obama said he is willing to consider changes in the tax exclusion on employer-provided benefits and penalizing health insurers that offer high-end health insurance plans, but he does not support eliminating the tax break entirely. He noted that he had not signed off on any particular proposal to change the exclusion.

  By Jeff Carlson and Paula Cruickshank, CCH News Staff

White House Press Release: CEA Releases Report on the Economic Effects of Health Care Reform on Small Businesses and Their Employees

Executive Office of the President Council of Economic Advisers Report: The Economic Effects of Health Care Reform on Small Businesses and Their Employees
 

Tax Analysts report: